procurement new zealand case study world bank. nz = 4 million people, $30bn pp spend

Procurement New Zealand Case Study

World Bank

NZ = 4 million people, $30bn PP spend

Kiwi approach

Establishing Procurement Reform

• Cabinet support – prove yourself!• Change perceptions

– Plain language– Commercial– Engaging (use new media)– Beat stereotypes

• Self funding program• Not just centralized procurement

Case Study – New Zealand Procurement Reform

Procurement Reform Programme

3 elements:

Programme Establishment• 2.0M + 6M Euro LoanProgramme Funding• 1.5% levy on AoG spend


Policy: Principles of Procurement


Understand where the ‘value’ is

Government Branded Collaborative contracts

All of Government

SyndicatedCommon Capability

Governance: Cabinet direction for each category through PFLAG

Form: single panel contracts between Crown and Suppliers

Use: mandated unless there is a good reason not to

Lead: PFL through GPB Centres of Expertise

Lead cost recovery: yes

User costs: agency pays administration fee on each purchase (collected by suppliers)

Authorised buyers: Public Sector plus ‘Eligible Agencies’

Governance: Cabinet direction through Procurement Functional Leadership Advisory Group (PFLAG)

Form: multiple:a. single supplierb. panel contracts

Use: voluntary

Lead: any agency

Lead cost recovery: no

User costs: free

Authorised buyers:

c. Public Sector plus ‘Eligible Agencies’

Governance: mixed:a. Cabinet mandatedb. through Approved Functional

Leader

Form: multiplec. single supplierd. panel contracts

Use: mixed:e. opt-out (for mandated

agencies)f. opt-in (for voluntary

agencies)

Lead: relevant Functional Leader

Lead cost recovery: usually

User costs: mixed:g. administration feeh. levy

Authorised buyers: mixedi. Public Sector plus ‘Eligible

Agencies’j. Authorised private sector

providers (“Authorised Agent) acting on behalf of agencies

31 2

All-of-Government Contracts

Products & commodities

ProfessionalServices

Creative Professional Services

Upcoming Categories

• Office Consumables• Vehicles• Desktops/Laptops• Mobile Voice and Data• Printers

• Legal• Recruitment• Energy Mgmt

• Advertising

• Air Travel• Electricity• Industrial Consumables

• Financial Services• Reticulated Gas• Building Materials• Consultancy• Rental Cars &

Accommodation• Health


Syndicated Contracts (90+)


Cost savingsDriving value for money

Building critical mass

Participation – Require

Public Service29 Departments &

Ministries


Participation - Require, Expect

Public Service

State Services (127)

Police

Defence

HospitalsSchools

Arts, TV & Radio

Research29 Departments & Ministries

200 Crown Entities

Parliamentary Services

Reserve Bank


Require, Expect, Encourage

Public Service

State Services (127)

State Sector (50)

Public Sector (78)

Police

Defence

HospitalsSchools (2500)

Post

ElectricityMining

Universities & PolytechnicsGas

Arts, TV & Radio

Research29 Departments & Ministries

Local Councils

Regional Councils

200 Crown Entities

Parliamentary Services

Reserve Bank


Getting the right results

Strategic Procurement – create the right strategy

• Business Needs Analysis– Data gathering

• Market Analysis• Risk Analysis• Vision of future supply market• Gap• Options analysis• Reverse marketing and procurement


Business needs and Supplier Market Analysis

Customer (our business needs)• Who is buying?• What are they buying? Changing patterns?• What is driving their selection criteria?• Volumes?

Supplier• How attractive is our business to each potential supplier?• Where do we sit in their business model? (i.e. When Hyundai increased their

sales targets a consolidated AoG approach offered an easy way to achieve their new target).

• How can we improve how attractive we are?


Total SavingsFY11/12

Forecast Savings FY 12/13

Total Forecast Savings by 31

June 2013

Total Forecast Savings over Contract Life

Original Projected Savings

Office Consumables $7.9 $6.0 $13.8 $25.6 $30.0Vehicles $11.9 $9.0 $21.03 $41.0 $18.5Desktop/Laptop $8.7 $5.8 $14.5 $26.5 $45.6Print Devices $3.7 $7.1 $10.8 $25.2 $20.7Air Travel $0.8 $7.5 $8.3 $64.3 $70.0Legal Services $0.9 $4.2 $5.1 $44.5 $108.0

Mobile Voice & Data $0 $3.0 $3.0 $30.6 $60.0

Travel Management (note 1) NA NA NA NA NA

Recruitment NA $5.0 $5.0 $54.0 $28.0

Electricity (note 1) NA NA NA NA NA

Total $33.9M $47.8M $81.6M $311.9M $380.8M

Case StudyAoG Recruitment Services

AoG Contract – Recruitment Services

You Tube Video’s


Objectives

• Delivering better value for money on external recruitment services

• Delivering more efficient/cost effective market engagement

• Building capability to effectively purchase external recruitment services

• Maintaining a sustainable and competitive market

• Identifying and promoting best practice external recruitment

• Ensuring Participating Agency external recruitment needs are met


Temporary Staff

Permanent Staff

Focused on High Spend Areas of Common Need

Contractors

Admin

Examples:PAs

Call Centre

IT

Examples:Developer

Tester Analyst

Corporate

Examples:ManagersAccountsLawyersPolicy

Roles Unique to one Sector of

Government

ExamplesTeachers, Nurses

Police

Co

ntin

ge

nt

L

ab

ou

r F

orc

e

In Scope Areas: Common skill sets across most Government Agencies

Out of Scope Areas:


Tender Evaluation Process

Phase 1

Quality EvaluationTender Response

Survey of Clients and Candidates

• Shortlist Created for Each of 9 Lot

Price NegotiationE-Negotiation for each LotPhase 2

Panel Chosen by LotOn Basis of:

Value for MoneyHighest Quality ScoreAdding Lowest Price

Panel Structure

• Oversight by Probity Auditors and Governance from a Client Advisory Group


Solution Outcome

9 ‘LOTS’ – Offering Choice

ADMIN CORPORATE IT

Perm

Temp

Contractor

• Total of 44 Providers appointed to provide services in 1 or more Lots

• Significant Choice to Government Agencies • Negotiation of free ‘value-added’ services

24 Providers

30 Providers

16 Providers

18 Providers

19 Providers

15 Providers

23 Providers

29 Providers

23 Providers


Achieved Significant Reduction in Supplier Costs

Before: After:

Table show Provider mark ups

Base Supplier Fees – 50% reduction some casesExample Temp range of 18-37% to now 9-20% mark up


AoG Relationship Model and Transition

AoG Contract and Relationship Model


Relationship Management


AoG Contract Structure

BA OUTCOMESRBA OUTCOMES

RBA OUTCOMES

Participation Memorandum of Understanding (MoU) between CoE

& Government Agency

Purchase Order or Statement of Work between Government

Agency & Supplier

Mutual performance & contract management obligations

LoA (5)

LoA (4)

LoA (2)LoA (3)

PO/SoW (5)

PO/SoW (4)

PO/SoW (3)

PO/SoW (2)

Supply Agreement between CoE & Supplier (AoG Contract)


How agencies transition onto an AoG contract

Panel Provider Example: External Legal Services- Corporate & Commercial• Competition• Consumer• Contract & Tendering• Corporate Governance• IT• Intellectual Property• JV’s/PPP’s• Overseas Investment• Takeovers, M&A• Other (Corporate and

Commercial)


Supporting the agency buying decision

In order to help agencies make informed decisions and make it easy to purchase from AoG contract panel’s we have developed documents and tools: • Panel Directory’s • Value-for-money ranking’s • Effective hourly rate calculations• Legal Services Order’s• Benchmarking Report’s


Benefits

Benefits of Centralized Procurement

• Build capability (Centres of Expertise)• Strategic rather than tactical procurement

(adequate resourcing & market intelligence)• Establishment of a common contract and

governance framework• Stronger centralised leadership and support• Common savings measurement


Benefits of Centralized of Procurement continued

• Circa USD $300M of savings in common areas of government spend for goods not made in NZ

• Participation grew as agencies became aware of the value being provided.

• Greater consistency of policy implementation and engagement with business

• Improved ability to influence capability and capacity development

• Great things can come from working togetherCase Study – New Zealand Procurement Reform

Potential Pitfalls of a Centralised Approach

• Aggregation of requirements can be a viewed as a barrier to SMEs winning govt business

• Perceived lack of control and influence by government agencies

• Perception that large internationals will enter the NZ market at the expense of NZ companies

• Too strong a mandate can be dangerous


Questions?

www.procurement.govt.nzCase Study – New Zealand Procurement Reform

$ Savings through centralized

procurement is the oxygen of New

Zealand’s procurement

reform

Whaia te iti kahuranga ki te tuahu koe me he maunga teitei

Aim for the highest cloud so that if you miss it, you will hit a lofty mountain

procurement new zealand case study world bank. nz = 4 million people, $30bn pp spend

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